Answer the following Essay Type Questions SportXpert company manufactures sport
ID: 3174131 • Letter: A
Question
Answer the following Essay Type Questions
SportXpert company manufactures sport bikes. It assesses its fixed costs at 81,000 SAR for a year. Each mountain bike carries on average a variable cost of 300 SAR. SportXpert sells every bike at a price of 1,200 SAR.
A)Determine the number of bikes that the company must sell to reach its break-even point.
(B)Assuming that the company manufactures 180 sport bikes per year (regular activity over the year). What will be its benefit?
Explanation / Answer
A) Fixed cost = 81,000
Cost per bike = 300
Let number of bikes = X
Price per bike = 1200
Total income for X bikes = 1200 X
Total expense for X bikes = 81000 + 300 X
To find X for break-even point :
81000 + 300 X = 1200 X
So,
1200 X - 300 X = 81000
900 X = 81000
So, X = 90
(B) X = 180
Income = 1200 X 180 = 216000
Expendityre = 81000 + 300 X 180
= 81000 + 54000
= 27000
So, benefit = 216000 - 27000 = 189000